Archive for May, 2014

The Labour Party, in the lead up to this years’ election, is proposing to cut immigration to help reduce the rapidly rising cost of housing as covered in the Press today and echoed by Phil Twyford on The Nation this morning.

“Labour’s proposal would, in part, see the “points system” under which skilled migrants get entry to New Zealand tweaked in response to net migration flows.”source

So what’s wrong with this policy?

Well there are quite a few problems, but the main one is that doesn’t work.

A few issues
Some of the main issues with this have been identified in todays’ article, for example that the Permanent and Long Term Migration figures being used cover everyone coming in for a year or more (working holidaymakers, students, temporary workers and residents), the vast majority of which would have no intention of buying a house here.

When Labour talks about the “points system” what they mean is a system used in assessing applications under the Skilled Migrant Category (SMC) of New Zealand’s Residence Programme. Points are awarded for age, work experience, qualifications with weighting towards having skilled employment here, especially if this is in an area of long term skill shortage.

There are a number of problems with using the SMC to manage immigration like this such as:

Time lag
It takes on average between 8 and 12 months for an application to go through this process, longer if the person is offshore. Any changes will take a very long time to have an effect.

Numbers
If Labour is planning to use this immigration route to manage immigration by 25,000 to 35,000 there is a problem – only 18,156 visas were granted through this stream last year. A cut could easily see the entire stream canned.

While some people might think that would be a good idea, remember that NZ is in an international battle for skills, trying to attract top migrants here to fill skill gaps. We’re not talking about gaps which can be met by training a few I.T. graduates as the article suggests, we’re talking about attracting qualified professionals who already have years of experience.

I was talking to a Christchurch employer recently who confirmed for every highly skilled foreign worker (usually with 10+ years of experience) they employed they could employ and train at least 2 New Zealanders.

Incentive
So under this policy SMC points will move around in an unpredictable way. Is it an incentive for migrants to have to pay $2,320 to enter a system where the goal posts are continually moving? We need more transparency in immigration, not less.

Ignoring history
Finally there is one major problem with this policy – it doesn’t work. We know it doesn’t work because it hasn’t.

Successive changes were made by government in January 2010, June 2011 and January 2013 to make the SMC points system harder to get through, as a result visas granted have dropped by 32.78% compared to 2008/09. The effect of this has been nearly 32,000 less people allowed residence visas under SMC during the past five years.

What effect has this had on Auckland house prices? Why would further cuts have a different effect?

Interestingly during the same period (25 July 2011) “residential property development” was added by the government to the list of acceptable investment types for wealthy overseas investors to apply for visas here. Just sayin’.

Interview with CanterburyTV news today about immigration, the rebuild and what the effects of cutting work visas might be.

We’re right in the heart of Christchurch providing advice to rebuild employers and workers every day. Immigration has become a key issue, but mostly because people are being scared by misused statistics and partial information often confusing permanent and temporary migration.

Work visas holders are here only because we need them and cannot find NZ workers to do jobs that need skills and years of experience – apprenticeships are vital for local youth, but unemployment for men here is down to 2% and to rebuild we need mostly experienced experts overseeing a smaller number of trainees.

Training in many areas has really taken off because of the overseas experts helping our local tradespeople in giving those with an aptitude tuition and oversight. You can’t train an electrician, plumber or stonemason overnight, but because of the work visa holders many young New Zealanders are beginning careers now that will help this country into the future long after those visas have expired.

From these stats it is clear numbers have changed since last year due to:

16,151 less NZ citizens leaving the country;

3,267 more NZ citizens arriving in NZ; and

9,954 non NZ citizens arriving.

So roughly 66% of the change was the movement of NZ citizens, 18% was an increase in the number of Australians coming to NZ and 15% was ‘everyone else’.

As a point of interest the only aspect of immigration which is not carefully controlled or managed by the NZ government relates to Australians – citizens and permanent residents can simply get on a plane and are automatically handed residence visas at the border.

This year there was an increase of 5,391 Australian citizens coming to NZ, a rise of 34%. I wonder how many of the 15% ‘other’ were permanent residents of Australia, the stats do not show this.

By comparison looking at the other countries there were:

1,186 more Indian citizens;

736 more Chinese citizens;

662 more German citizens;

402 more US citizens;

262 more South African citizens; and

16 more UK citizens.

Blind statistics
Using these statistics however does not give detail on why people came to NZ or how long they planned to stay – we only know they intended to stay for a year or more.

My last post looked at residents only – those you could argue who are most likely to buy a house – asking which of these the politicians would cut.

Perhaps it would be better to look at all of the visas issued last year which would be likely to be for a year or more to compare more closely with the figures being used by politicians.

Looking through the immigration department statistics on visas issued in 2012/13:

14.6% were residence visas – arguably the most likely to buy a house as they stay permanently. Of those 11,291 were the partners and children of New Zealand citizens and residents.

21.3% were foreign fee paying students who paid around $1 billion to study here last year, spending around $848 million on accommodation etc.

19% were young people on a 1 year working holiday visa, these were required to bring collectively at least $210 million into the country to spend.

17% were skilled workers (temporary and permanent) where employers had proved they could not find NZ workers to do the job offered (paying taxes, filling skill gaps, creating jobs and training NZ citizens).

Another 10% were partners (of visa holders or NZ citizens) on temporary visas.

That’s a total of 82.4%.

The remaining visas went to refugees (1%), children studying at school (3.3%), parents of visa holders (1.7%) etc.

If numbers are going to be cut where will the politicians start I wonder?

Cutting immigration has become a key election issue on both sides of the political spectrum.

Labour leader David Cunliffe has recently been reported on the NBR website indicating Labour would slash the net migration flow from 40,000 — which he claims is overheating the property market — to between 5000 and 15,000.

So what would this mean?

Net migration
There are different measures of migration and Mr Cunliffe would be talking about Permanent and Long Term migration, or the New Zealand Residence Programme as both average just under 40,000. As we’re talking about the housing market it would make sense to look at how this would impact on residence visas issued.

On average just under 40,000 people come to live in New Zealand permanently every year. These are made up of four main streams – using 2012/13 figures roughly these are:

51% – skilled workers, entrepreneurs and investors

29% – the foreign-born children and partners of New Zealand citizens and residents

11% – the parents of migrants

8% – humanitarian and pacific quotas

So if immigration was cut, who would still get through? Are we just talking about foreign workers? The following is a view of the idea of these cuts using actual immigration figures from 2012/13:

5,000 places
I guess the individuals getting first option would be those NZ legally has to take under agreements and treaties – around 2,200 people.

Second option would presumably go to the children of NZ citizens and residents – around 1,200 places.

There would sadly only be just under 1,500 places for the foreign-born partners of kiwis with 85% (around 8,500) losing out.

This would leave no spaces for skilled workers or investors. I am guessing parents of migrants and other humanitarian cases we are not legally required to take would be at the back of the queue, no space for them either.

15,000 places
Expanding the number of places to 15,000 would enable all of the children and partners of NZ citizens and residents to get through – phew!

There would be space for around 883 skilled workers and their families (assuming the current rate of 1.65 people per application continues). Parents and other humanitarian cases would presumably lose out.

The effect of this change
I won’t go into how this policy might affect NZ, I’ll leave that to your discussion, but I’ll pose some questions:

Will it be an incentive for kiwis to return to NZ if their families are not allowed to come too?

Certainly food for thought. The migrant quota has been in place for many years (i.e. under Labour and National governments) providing benefit to NZ quietly year by year with balanced and controlled migration.